Indonesia could have key EV edge
Indonesia is the world's top producer of nickel, accounting for up to 30% of global production. It has the world's largest nickel reserves, which are set to last for more than 30 years, and also boasts large amounts of copper, bauxite and nickel ore.
This makes Indonesia a critical player in the development of lithium-ion batteries, demand for which has skyrocketed over the past two decades as they are used to power mobile phones and laptops.
Demand is set to accelerate as environmentally conscious drivers turn increasingly to electric vehicles (EVs) and hybrid cars. By 2025, around 70 million EVs are expected to be on the world's roads, according to the International Energy Agency.
Indonesia's government and businesses are embracing this trend and want to transform the country into a fully integrated global battery production hub, from mining to processing and recycling batteries.
While EVs haven't been popular in Indonesia, demand has increased since President Joko Widodo issued a decree that only electric and autonomous vehicles can be used for transport in the new capital city in East Kalimantan. At the same time, nickel mining and battery development have been declared a key priority sector in recent reforms to encourage investment.
Policymakers have been wooing foreign investors and automakers such as Tesla with the promise of growing profits and easier operational, licensing and permit regulations.
Companies are responding. A group of Indonesian state-owned enterprises have formed a new venture called Indonesia Battery Corporation to manufacture batteries, in partnership with Chinese and Korean firms.
As of this year, there were 328 nickel mining business permits issued for exploration and 280 permits issued for production, indicating an increase in uptake, according to the Mining Advocacy Network.
Nickel has been positioned as an inexpensive, more environmentally friendly and less problematic component for battery production, as compared to cobalt, in light of human rights concerns raised over mining practices in the Democratic Republic of Congo.
However, whether nickel is accepted as a cleaner, more sustainable option in the historically dirty mining industry in Indonesia remains to be seen. Some critics believe mining is a fundamentally unsustainable activity dependent on emissions-heavy activities such as forest clearing, digging into the earth and the transport of ore.
Most nickel mining in Indonesia is located in Central Sulawesi, an area with rich biodiversity and local indigenous communities, which may face disruptions to their way of life.
Today, investors are confronting a business environment where labour, social and environmental considerations are equally important as profit making. This is especially true of the EV industry where consumers are looking for greener options.
As stakeholders are increasing their scrutiny of companies' environmental and social footprint, Indonesia should ensure that its extraction and production of nickel meets environmental and social standards so that it can sustainably manage its rich resources.
Dr Thaweelap Rittapirom is a director and executive vice-president of Bangkok Bank. For more columns in this series, please visit www.bangkokbank.com